Chapter 1

The Scope and Challenge of

International Marketing

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 Learning Objectives
1-1 The benefits of international markets
1-2 The changing face of U.S. business
1-3 The scope of the international marketing task
1-4 The importance of the self-reference criterion
(SRC) in international marketing
1-5 The increasing importance of global awareness
1-6 The progression of becoming a global marketer

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 Global Commerce Causes Peace 1 of 3
Global commerce thrives during peacetime
• Economic boom in North America in late 1990s
• The end of the Cold War
• Opening former communist countries to world trading system

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 Global Commerce Causes Peace 2 of 3
International trade is important
• Lack of consistent and predictable trade policies can lead to
tension
• Many world events affect trade
• Company scandals and layoffs
• Wars and political unrest
• Natural disasters
• Financial and economic disruptions
• Populist developments
• U.K. break with the European Union via Brexit vote
• Populist candidates like Donald Trump in the U.S. are elected

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 Global Commerce Causes Peace 3 of 3
Four Trends Affecting Global Business
1. Growth of the WTO and open trade agreements
2. Developing countries moving toward free trade
3. The Internet, cellular, and networked communication
4. A mandate to manage the global environment for the
future

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 International Trade and Peace

A rail has been built to link North and South Korea for the first time in
nearly 60 years to transport materials. This shows a step toward peace
and international trade.

©McGraw-Hill Education ©Han Myung-gu

 The Internationalization of U.S. Business
Globalization of markets increasing
• More foreign customers, competitors, suppliers
• Competition comes from domestic and foreign firms

Many foreign-controlled companies in U.S.

• Foreign direct investment in U.S. is above $3 trillion
• Foreign-owned companies in almost all industries:
• Automobiles (Honda, BMW, Mercedes)
• Appliances (LG Electronics, Frigidaire)
• Convenience stores and restaurants (7-Eleven, Ben & Jerry’s)
• News and entertainment (The Wall Street Journal, Pearle Vision, Universal
Studios, RCA)
• Hotels (Holiday Inn, Waldorf Astoria)

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 Exhibit 1.1 Foreign Acquisitions of U.S. Companies 1 of 2
U.S. Companies/Brands Foreign Owner
7-Eleven Japan
Ben & Jerry’s (ice cream) U.K.
Budweiser Belgium
Chrysler Italy
Chrysler Building (NYC) Abu Dhabi
Church’s Chicken Bahrain
CITGO Venezuela
Columbia Pictures (movies) Japan
French’s Mustard U.K.
Firestone (tires) Japan
Frigidaire Sweden
Genentech Switzerland

©McGraw-Hill Education Source: Compiled from annual reports of listed firms, 2018.
 Exhibit 1.1 Foreign Acquisitions of U.S. Companies 2 of 2
U.S. Companies/Brands Foreign Owner
Gerber Switzerland
Holiday Inn U.K.
Huffy Corp. (bicycles) China
Oroweat (breads) Mexico
Purina (pet food) Switzerland
Random House (publishing) Germany
RCA (television) France/China
Smith & Wesson (guns) U.K.
Smithfield Foods (pork) China
Swift & Company (meatpacking) Brazil
The Wall Street Journal Australia
T-Mobile Germany
Waldorf Astoria Hotel (NYC) China

©McGraw-Hill Education Source: Compiled from annual reports of listed firms, 2018.
 Mexican Brands in the U.S.

© John Graham
Along with NAFTA have come two of Mexico’s most prominent brand names.
Gigante, one of Mexico’s largest supermarket chains, now has several stores in
Southern California, including this one in Anaheim. Grupo Bimbo, a growing Mexican
multinational, has recently purchased American brand-named firms such as
Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread.

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 Revenues from International Sales
American brands have a global reach
• Important for U.S. businesses to thrive
• In many cases, foreign sales exceed domestic sales
• Foreign investments generate a lot of revenue
• Apple had revenue of $215 billion in 2016; 60 percent of total
revenue from international sales

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 Exhibit 1.2 Selected U.S. Companies and Their
International Sales
Company Global Revenues Percent Revenues from
(billions of dollars) Outside the U.S.
Amazon 136.0 33.6
Apple 215.1 60.0
Boeing 94.6 59.0
Dow Chemical 48.2 65.5
Exxon 197.5 73.5
Ford 151.8 38.5
General Electric 119.7 70.3
Intel 59.4 78.2
Johnson & Johnson 71.9 47.4
Procter & Gamble 65.3 58.7
Walmart 482.2 24.5

©McGraw-Hill Education Source: S&P 500, 2016: Global Sales Year in Review (July 2017).
 International Marketing Defined
The performance of business activities
• Plan, price, promote, direct flow of goods and services for
profit
• For consumers or users in more than one nation
Unique from domestic marketing
• Many unfamiliar problems require unique strategies to
cope with problems
• Level of uncertainty and uncontrollables in foreign markets

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 The International Marketing Task
Uncontrollable uncertainty
• Comprised of uncontrollable elements in business
environments
• Each international market has own set of factors

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 Exhibit 1.3 The International Marketing Task

Jump to long image description.

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 Marketing Decision Factors 1 of 2
A marketing program is designed for optimal
adjustment to uncertainty
Controllable elements in domestic environment
• Blend all elements to capitalize on anticipated demand
• Can alter elements if needed
• Changing market conditions, consumer tastes, and corporate
objectives

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 Marketing Decision Factors 2 of 2
Uncontrollable elements in domestic environment
• Actively evaluate elements to make adjustments
• Determine the outcome of the marketing enterprise

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 Aspects of the Domestic Environment
Domestic Environment Uncontrollables
• Political and legal forces
• Economic climate
• Competition
• Level of technology
• Structure of distribution
• Geography and infrastructure
• Cultural forces

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 Aspects of the Foreign Environment
Foreign Environment Uncontrollables
• Political and legal forces
• Economic forces
• Competitive forces
• Level of technology
• Structure of distribution
• Geography and infrastructure
• Cultural forces

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 Citibank in Brazil

© John Graham
A Citibank branch in the heart of Brazil. One of the worl-d’s great multinational
corporations barely survived the financial debacle of October 2008. Indeed,
during the past few years, its international operations have performed much
better than its domestic ones with the exception of those in Brazil. In particular,
emerging markets such as China, India, and the Philippines proved relatively
resilient since the financial crisis that began in 2008.
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 Environmental Adaptation Needed
Cultural adjustment: the most challenging and
important task
Duties of international marketers
• Interpret influence of each uncontrollable element on
market
• Adjust marketing efforts to cultures in which they are not
attuned
• Be aware of own frame of reference when evaluating
markets
• Often based off acculturation in home country

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 The Self-Reference Criterion and Ethnocentrism
Both impede ability to accurately assess foreign market
Self-Reference Criterion (SRC)
• Unconscious reference to own cultural values, experiences,
knowledge
• Problematic when used as basis for decisions
Ethnocentrism
• One’s own country, culture, or country is best
• Most problematic when affluent countries work with less
affluent

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 Be Vigilant of SRC and Ethnocentrism to Avoid
Business Errors
1. Define situation in home-country’s cultural traits,
habits, or norms.
2. Define situation in foreign-country’s cultural traits,
habits or norms through consultation with natives.
Make no value judgments.
3. Isolate SRC influence in situation and carefully
examine how it complicates the issue.
4. Redefine situation without the SRC influence and
solve for optimum business goal solution.

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 Developing a Global Awareness
Main components
• Tolerance of and willingness to learn about cultural
differences
• Knowledge of cultures, history, world market potential,
and global economic, social, and political trends

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 Stages of International Involvement
Main characteristics of companies that internationalize
quickly
• High-technology and/or marketing-based resources
• Smaller home markets and larger production capacities
• Mangers who are well-networked internationally

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 Stages of International Marketing Involvement
More reactive and less strategic
• No direct foreign marketing
• Infrequent foreign marketing
More involved in strategic planning
• Regular foreign marketing
• International marketing
• Global marketing

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 Exhibit 1.4
The KOF
Globalization
Index (top ten
plus selected
other countries)

Source: Savina Gygli, Florian Haelg, and Jan-Egbert Strum, Gygli, Savina, Florian Haelg, and Jan-Egbert Sturm (2018): The KOF Globalisation
Index–Revisited, KOF Working Paper, No. 439 (2018).
Jump to long image description.
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 Appendix of Image Long Descriptions

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 Appendix 1 Exhibit 1.3 The International Marketing
Task
The graphic shows three concentric circles labeled with elements of the
marketplace.
The innermost circle is labeled Firm Characteristics and includes controllable
elements: product, price, research, promotion, and place or distribution.
The next circle is labeled Domestic Environment and includes uncontrollable
elements: political and legal forces, economic climate, and competitive
structure.
The outermost circle is labeled Foreign Environment and includes
uncontrollable elements: political and legal, cultural, economic, and
competitive forces; geography and infrastructure; structure of distribution;
and level of technology.
The graphic shows these elements for the sample country layered on top of
three separate circles. Each circle represents three international markets,
each with its own environmental elements.

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 Appendix 2 Exhibit 1.4 The KOF Globalization Index

A bar chart shows 20 countries that are ranked by their political, social, and
economic globalization.
The political globalization measures include trade flows, FDI flows, income
payments to foreigners, mean tariff rates, and taxes on international trade.
The social globalization measures include telephone traffic, international
tourism, foreign population, Internet users, and televisions.
The economic globalization measures include embassies in country,
membership in international organizations, international treaties, and
participation in UN missions.
The highest rates countries are Netherlands, Ireland, Belgium, and Austria, in
that order. The lowest rated countries are Brazil, China, Mexico, and Egypt, in
that order. The U.S. ranks towards the middle of the 73 countries rated.

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